Idea Cellular announces the results of First Quarter of 2018

Idea Cellular's revenue for the quarter declined to Rs. 58,892 million in Q1FY19, as against Rs. 61,373 million in Q4FY18 mainly on account of down trending of ARPU, representing a normalised decline of 2.9% QoQ, after adjusting for impact of exclusion of one month tower revenue (on completion of sale transaction of Idea standalone towers to ATC on May 31, 2018) and full quarter impact of TRAI directed International IUC rate reduction (vs 2 months impact in last quarter). The EBITDA for the quarter stands at Rs. 6,595 million. The ARPU for the quarter is Rs. 100 as against Rs. 105 in Q4FY18. Idea’s VLR subscribers as on June 30, 2018 stand at 203.4 million with a market share of 20.9% (May 2018), an improvement of 1.4% compared to May 2017.

The increasing adoption of unlimited voice and bundled data plans continued to drive significant volume consumption of mobile voice and broadband data. The quarterly voice minutes at 349.5 billion, grew at a staggering rate of 39.4% vs. 250.7 billion minutes in Q1FY18. The monthly voice consumption (per user) has risen exponentially to 609 minutes from 441 minutes per months in Q1FY18.

Similarly, broadband data usage per broadband data subscriber has risen sharply to monthly usage of 8GB in Q1FY19, compared to 3GB per month a year back. In Q1FY19, the broadband data volumes reached record level of 992 billion MB, more than 4 times compared to mobile broadband data volumes a year back. The company’s wireless broadband subscriber (EoP) base now stands at ~41 million, an addition of 14.6 million broadband data customers over last one year. During the quarter, Idea completed the rollout of Voice over LTE (VoLTE) services across 20 – 4G Telecom Circles. With the merger round the corner, the 4G network rollout was muted during the quarter but expected to gather momentum in the remaining three quarters.

Nearly ready for Birth of New Idea – Vodafone Idea limited

With the receipt of final DoT approval for merger Vodafone India Ltd. (VIL) & Vodafone Mobile Services Ltd. (VMSL) with Idea, the company is in the final phase of merger completion. The combined entity named ‘Vodafone Idea Ltd.’ will be India’s largest mobile operator and the 2nd largest in the world, with nearly 408 million subscribers. The leadership team of Vodafone Idea Ltd. has already been announced on March 22, 2018 and the new management is ready with an extensive plan to consolidate the operations and network of the two companies in a phased manner. The key focus area for the merged team will be to fast forward the substantial cost synergies with an estimated NPV of ~$10bn and rapidly expand the broadband coverage and capacity by redeployment of overlapping equipment & refarming/consolidation of spectrum etc.

Both the companies currently under ‘Active infrastructure sharing’ and ‘ICR (Intra Circle Roaming) arrangements’ are already sharing nearly 66,000 sites.

Update on Asset Monetisation & Fund Raising

The sale transaction of Idea Standalone towers to ATC was completed on May 31, 2018 for an enterprise value of Rs. 40 billion. In the meantime, the announced merger of Bharti Infratel & Indus Towers is on track with steady progress on regulatory approval. Bharti Infratel’s release stated that the merger with Indus is estimated to be completed by end of Financial Year 2019, giving Idea the option of monetising its stake in Indus.

To summarise, with equity infusion of Rs. 67.5 billion by Idea in Q4FY18, sale of standalone tower of Idea & Vodafone for Rs. 78.5 billion (including Rs. 38.5 billion of Vodafone India in Q4FY18), planned equity infusion by Vodafone Group Plc to reduce Vodafone India’s debt (in line the with merger agreement) and option of monetizing Idea’s 11.15% Indus stake available by March 2019, the company has primarily completed this phase of augmenting its long term capital resources.

While near term challenges persist, long term opportunities in the mobile sector continue to remain attractive. With the exit of sub-scale operators, consolidation of Industry structure is nearly complete. Also, with the introduction of bundled plans, Indian mobile customer’s habits has permanently settled at higher consumption of Voice & Data services. Once the current phase of below cost tariffs is over, it is inevitable that the Industry ARPU will revive. Additionally, the low rural penetration, improving adoption of data users and SIM consolidation augur well for long term prospects of existing large mobile operators.